Our country has overcome many challenges. From war to economic depression and recession, we’ve always come back strong, leaner and more nimble.
In recent history, after stock market crashes like Black Monday in 1987 or the catastrophe of 9-11, we worked through subsequent recessions with characteristic vigor and a “Let’s Roll” get back to work attitude.
Regarding the recovery from The Great Recession of 2007 to 2009, however, only the Jimmy Carter years following the recession of 1973-1975 came close to producing the kind of the suffering we now experience. During that painful time, higher gas prices, rising interest rates and persistent high unemployment were the reasons behind why the period was dubbed a “Malaise”.
The Malaise is back. Only now it’s a malaise on steroids, an Obamalaise.
You know we are in trouble when politicians and pundits claim that we cannot cut government spending, because doing so will “push us into recession”. Considering that government spending as a percentage of GDP has been jacked up to around 40% that is cause for concern.
Also cause for concern is that nobody in Washington really seems engaged in creating jobs. During the campaign Obama talked plenty about jobs and strengthening the economy. Now he seems to have lost interest in that. Apparently the green economy is not as, well, green as we hoped.
What exactly is powering the current recovery anyway? Did Obama really save us from economic disaster with his bail-out and stimulus as he claims?
Obama did not save us. He saved a relatively small number of Wall Street tycoons and executives, paid off their bad business debt with our money while millions of workers lost their jobs and their homes. If that’s “saving us”, then next time we’ll do better to avoid such help.
This recovery is stalling out precisely because of all the help we are getting. Let us review some of the wonderful assistance we are all getting from Washington. They are helping us by:
Giving us over 17 trillion in debt, a millstone hanging about our neck with more added every day.
Underestimating unemployment numbers, forgetting about those who drop off the reports after long-term unemployment.
Massively increasing federal regulations making it ever more costly and difficult to do any business at all.
Providing for exploding numbers of entitlement recipients, such as food stamps, creating a cycle of dependence and reducing the incentive to work for tens of millions.
Undercutting the American worker by pushing to have millions of illegal immigrants receive amnesty.
Demoralizing the work force—the entire population even—as folks struggle to understand why our government spends so much time and money spying on us, the people they are charged with protecting.
Continuing with a costly and unpopular policy of never ending shadow-war overseas.
I know a lot of people are jaded and say all politicians are corrupt, and this one is no worse than that one and so forth. That may be true to a certain extent, however we must reject that argument on principle--we’re not talking about monopoly money here. It’s real, and has a real effect on real human beings.
This toxic mix listed above is what causes an Obamalaise, and for a prime example and warning of what can happen as a result, look at Detroit Michigan.
Kwame Kilpatrick, the former democratic mayor of Detroit, was recently convicted of dozens of felonies including fraud, racketeering, perjury and obstruction of justice. He was sentenced to 28 years in prison, one of the lengthiest sentences ever for an elected official.
Once the world’s premier model of industrial manufacturing, Detroit has now been reduced in many parts to an urban wilderness, thanks largely to politicians such as Kilpatrick and his lengthy collaborations.
Detroit is ground zero, it’s where the Obamalaise first descended after drifting out of Chicago.
If we don’t want our entire country to go the way of Detroit and morph into a bankrupt wasteland, it’s time to end these lengthy collaborations. It’s time to tighten our belt and shake off this bloated paralysis called Obamalaise before it’s too late.
Welcome to stocks in the news where the headline meets the trendline.
Stock Number One: Hertz Global Holdings, Inc (SYMBOL: HTZ)
And the headline says Hertz sinks despite better than expected profit as fleet issues weigh—Fly on the Wall
“Shares of car rental and leasing company Hertz (HTZ) are falling despite reporting better than expected quarterly earnings,” reports FOTW, “as the company noted it continues to have issues with fleet efficiency. WHAT'S NEW: Last night, Hertz reported third quarter adjusted earnings per share of 73c and revenue of $3.06B, compared to analysts’ consensus estimates of 71c and $3.06B. The company also reaffirmed its FY13 outlook.”
At issue is the size of the fleet that Hertz owns. They own a bigger fleet than demand warrants which means they are gonna have to sell some of those cars earlier than anticipated. That will cost them some money.
Analysts have been downgrading Hertz estimates for the last several months and that’s not a good sign. I like stocks with earnings or sales momentum.
The company is trading at 9 times it’s forward earnings estimates and doesn’t pay a dividend.
Our Ransom Notes Trendline says: Avoid Hertz
Stock number two: Endo Health Solutions Inc (SYMBOL: ENDP)
And the headline says: Endo Health Solutions Surges on Earnings, Complicated Acquisition– Barron's
“Endo Health Solutions, a generic-drug maker that competes with the likes of Mylan (MYL) Sagent Pharmaceuticals (SGNT) and Teva Pharmaceuticals (TEVA),” reports Barron’s, “has surged today after it announced better-than-expected earnings and made a big acquisition.”
Forget earnings: The story here is in the acquisition.
The new companies combined earnings take effect right away, and the tax advantages of being an Irish domiciled company make the deal attractive to analysts.
Just count it as another American company fleeing the United States for more attractive tax treatment.
Our Ransom Note Trendline says: Avoid Endo Health.
Stock Number Three: Pandora (SYMBOL: P)
And the headline says: Heck yeah, it’s a bubble! So what?– MarketWatch
“Whether or not this current market is full of outright bubbled stocks that we’ll look back at one day and marvel at the valuations people were paying for YelpYELP +2.39% and ZillowZ -0.31% , two of the stocks that came public during this app revolution, isn’t the point,” writes Cody Willard for MarketWatch. “The point is that almost all of our stocks are trading at much higher levels and higher multiples on future earnings than they were back in 2010, and that means there’s inherently more risk in them now.”
Willard is using put options as hedges to protect gains in stocks that might look a little bubbly to him, one of which he mentions is Pandora.
That’s good advice. If you don’t know how to do this, call a professional.
Our Ransom Note Trendline says: Use Put Options to Protect Gains in Bubbly Stocks
There is little to no incentive in the healthcare industry to hold down costs. Worse yet, the rewards for performing unnecessary surgeries is huge, while the risks of doing them are essentially nonexistent. Here are a couple of articles that show what I mean.
Prostate Cancer Radiation Therapy Rises as Doctors Profit
Bloomberg reports Prostate Cancer Radiation Therapy Rises as Doctors Profit.
Urologists who buy their own equipment to provide expensive radiation treatment are more likely to use it to treat prostate cancer even when the benefit for patients is unclear, research shows.
Prostate cancer is the most common tumor diagnosed in the U.S., where an estimated 238,590 men were told they had the disease this year. While only about 12 percent, or 29,270 men, will die from it this year, all will have to decide how, and whether, they want to treat the cancer.
A study published in the New England Journal of Medicine suggests that profits urologists make from referring patients to their own radiation facilities play an outsized role in the treatment decisions. One third of men whose doctors own radiation equipment get the therapy at a cost of about $35,000 per treatment course. The same doctors prescribed the therapy for just 13 percent of their patients before they had their own equipment and could profit directly.
“The results are striking,” said Jean Mitchell, the author of the report and a professor of public policy at Georgetown University in Washington, D.C. “It does appear that what’s driving this is financial incentives linked to ownership. Their behavior changes dramatically.”
Using claims data from the U.S. government’s Medicare insurance program for the elderly, Mitchell found that urologists who didn’t own the equipment prescribed IMRT for 15.6 percent of their patients in 2010, compared with 14.3 percent five years earlier. Its use among the NCCN doctors stayed constant at about 8 percent, while it soared to 44 percent among a matched-group of doctors who started to refer patients to their own radiation treatment facilities.
“It’s crazy the way the system is set up,” Mitchell said in a telephone interview. “The patients are going to do what their physician tells them to do. The patient becomes almost like an ATM machine, with the doctor extracting as much revenue as they can.”
Physicians in general aren’t allowed to refer their patients for treatment in facilities that they also own, because of the financial conflict of interest. However, radiation, as well as in-office ancillary services, such as doing blood work and x-rays, are exempted under U.S. law.
The analysis found that doctors who owned the IMRT therapy were treating men ages 80 and older just as aggressively as younger men with early stage prostate cancer. Since the cancer is generally slow-growing, and radiation can carry immediate side effects, including erection problems and urinary symptoms, the older patients may experience only the harms and no benefits.
The study bolsters similar findings with other forms of self-referral. In fact, some urologists have incorporated pathology labs into their practices, boosting the number of biopsies they perform, Mitchell said. Research has found similar results in other areas, including advanced imaging and surgery at physician-owned specialty hospitals.
Spinal Fusion Cash Cow
The Washington Post reports Spinal fusions serve as case study for debate over when certain surgeries are necessary.
By some measures, Federico C. Vinas was a star surgeon. He performed three or four surgeries on a typical weekday at the Daytona Beach, Fla., hospital that employed him, and a review showed him to be nearly five times as busy as other neurosurgeons. The hospital paid him hundreds of thousands in incentive pay. In all, he earned as much as $1.9 million a year.
Yet given his productivity, some hospital auditors wondered: Was all of the surgery really necessary?
To answer that question, the hospital in early 2010 paid for an independent review of cases in which Vinas and two other neurosurgeons had performed a common procedure known as a spinal fusion. The review was conducted by board-certified neurosurgeons working for AllMed, a company accredited to audit health-care businesses.
Of 10 spinal fusions by Vinas that were selected, nine were deemed not medically necessary, according to a summary of the report.
More than 465,000 spinal fusions were performed in the United States in 2011, according to government data, and some experts say that a portion of them — perhaps as many as half — were performed without good reason.
The rate of spinal fusion surgery has risen sixfold in the United States over the past 20 years, according to federal figures, and the expensive procedure, which involves the joining of two or more vertebrae, has become even more common than hip replacement.
Washington Post analysis of 125,000 patient records also shows that roughly half the tremendous rise in spinal fusions in Florida has been on patients with diagnoses that experts and professional societies say should not routinely be treated with spinal fusion.
In 2009, a former compliance official at the hospital filed a whistleblower lawsuit alleging illegal financial incentives for doctors. The court filings make available an array of documents — e-mails, testimony, audits. These and other sources allow a fuller depiction of the financial rewards and relationships that depended on treatment decisions. They also show how hospital administrators responded when suspicions arose that a doctor, who was generating millions in profits, may have been performing unnecessary surgery.
Vinas and his colleagues in neurosurgery earned as much as thousands of dollars extra — above their base salaries — for each procedure after a certain threshold. The vast majority of Vinas’s earnings came from such incentive pay, according to legal filings.
According to government estimates, each neurosurgeon at Halifax Health was generating more than $2 million a year in hospital profits. The hospital charged fusion patients an average of about $80,000, according to Florida records on Halifax Health analyzed by The Post, ranking the procedure as one of the more expensive.
Baklid-Kunz detected Vinas’s rapid pace of work in an audit and asked for further review of his surgeries, documents show.
But she was discouraged from investigating further, she said.
“Hospital administrators didn’t want to touch Dr. Vinas,” she said in an interview.
Instead, they referred to Vinas and the hospital’s two other neurosurgeons as “our high rollers,” she said, and told her that rather than cracking down on their billing that “we need to make them happy.”
Medicare In the Spotlight
Medicare, the nation’s health-care system for people older than 65, is at the center of the debate.
The agency estimated the amount of money spent improperly on spinal fusions was more than $200 million in 2011, for example, and most of that was because the treatment was deemed unnecessary, often because a more conservative course hadn’t been tried, officials said.
How could this happen?
The answer, in part, is that the Medicare system is not designed to discourage doctors from performing it, according to past and present Medicare officials.
At a very practical level, the bureaucracy offers little incentive to weed out unnecessary treatment: Medicare hires contractors to issue payments to doctors, and those contractors are paid based not on how many claims they reject but on how many they approve.
above emphasis mine
US Healthcare System Greased for Fraud
Medicare pays contractors based on how many claims they approve. Good grief!
Very expensive prostate radiation therapy is conveniently exempt from self-referral laws.
Although physicians in general aren’t allowed to refer their patients for treatment in facilities that they also own (with the exception of radiation therapies), the problem of incentives is universal, across the board.
Physicians paid on an incentive model, like spinal fusion star surgeon Federico C. Vinas, have every financial incentive to perform needless operations.
Every step of the way, the US medical system is greased to perpetuate fraud against taxpayers, against patients, against insurers.
US Healthcare System Explained in Six Succinct Points
It would have been nice if Obamacare fixed some of the above problems. Unfortunately, Obamacare did not fix any of them.
Fraud, ridiculous amounts of paperwork, and incentives to do the wrong thing were everywhere you looked before Obamacare. The same problems exist now.
Worse yet, Obamacare added to the mess by over-charging millennials and their kids, and undercharging smokers and others with unhealthy lifestyles. Except for those below certain wage thresholds, insurance costs are likely to increase.
Mike "Mish" Shedlock
I was actually going to defend some of the ignorance that one sees in this video, but I have decided not to. Just know that at least some of the people who so easily signed a petition for the expansion of the police state are also voters.
Welcome to stocks in the news where the headline meets the trendline.
Stock Number One: Facebook (SYMBOL: FB)
And the headline says Facebook is Doomed: Forrester Says Ads Tell a Sad Story—The Daily Ticker:
“Forrester, the respected market research group, has just published a brutal report on Facebook (FB) based on a survey of 395 marketing executives. The conclusion: ‘Facebook creates less business value than any other digital marketing opportunity ... [so] ... Don’t dedicate a paid ad budget for Facebook.’ Facebook responded that the report was ‘illogical and ... irresponsible.’”
I’ve said this since they announced the IPO: I love the company Facebook, but don’t think it’s a great investment. Having said that, it’s a bit rich for a digital rival- Yahoo!- to come out saying that Facebook is doomed.
Once upon a time Yahoo had the exact same problem: Big audience, poorly monetized.
I’m not buying Facebook here at 200 plus times earnings.
But I am watching it closely.
Our Ransom Notes Trendline says: Avoid Facebook
Stock number two: Yahoo! (SYMBOL: YHOO)
And the headline says: Yahoo rises after firm upgrades shares– Fly on the Wall:
“Shares of Yahoo (YHOO) are climbing after research firm Bernstein upgraded the stock in a note to investors earlier today. WHAT'S NEW: Yahoo's stake in Chinese e-commerce giant Alibaba is worth at least $24 per share to Yahoo investors, Bernstein analyst Carlos Kirjner estimated. Yahoo's stake in Yahoo Japan, a Japanese search engine and portal, is valued at $7 per share, while Yahoo has $3 per share in cash, added the analyst.”
Speaking of Yahoo, I loved it at $16 per share and even $18 a share. That’s when no one loved it. It took a while to be right, but eventually value won out.
Currently the company is trading at a trailing PE of 29 times earnings and a forward PE of 20 times earnings. Earnings estimates are going in the wrong direction however.
If you have profits, use stop loss orders. If not, avoid Yahoo entirely.
Our Ransom Note Trendline says: Hold Yahoo.
Stock Number Three: Groupon (SYMBOL: GRPN)
And the headline says: 5 better bets than Twitter – MarketWatch
“For many of you, this argument will fall on deaf ears. You’re going to buy Twitter just as you did Facebook Inc. FB -0.91%, Zynga inc. ZNGA -2.65% ,Groupon Inc. GRPN -2.08%and every other offering in the social-networking space that produced uneven or less-than promised results.”
For all of next year Groupon is supposed to yield only about .28 cents in profit per share, making the company’s forward multiple about 32 time forward earnings.
This is a company with a track record of disappointing investors, too.
In this market, there are plenty of companies much more attractive with better earnings prospects, if perhaps not as alluring.
Our Ransom Note Trendline says: Avoid Groupon
Forget the freedom of the “open road.” Soon every mile one drives may be relayed back to government tax collectors. I pray that your commute isn’t too long. It’s not like you pay copious gasoline taxes already or anything. No, the little digital spy in your car will determine how much you owe above and beyond your Income taxes, payroll taxes, sales taxes, highway tolls, phone taxes, and only God knows what other taxes. And don’t disconnect that black box. You wouldn’t want to go to jail for tax evasion would you?
The article says that at least some of the folks at Reason Magazine are for this kind of tax. If so we are shocked, and Reason ought to reconsider. We get that tying taxation closer to those who use a resource is probably a decent principal in spirit but to sanction a digital spy which will relay every bit of one’s movements to authorities seems incredibly shortsighted.
(From The LA Times)
Several states and cities are nonetheless moving ahead on their own. The most eager is Oregon, which is enlisting 5,000 drivers in the country’s biggest experiment. Those drivers will soon pay the mileage fees instead of gas taxes to the state. Nevada has already completed a pilot. New York City is looking into one. Illinois is trying it on a limited basis with trucks. And the I-95 Coalition, which includes 17 state transportation departments along the Eastern Seaboard (including Maryland, Pennsylvania, Virginia and Florida), is studying how they could go about implementing the change.
The concept is not a universal hit.
Inquiring minds are monitoring the Fed's Balance Sheet.
click on chart for sharper image
One more week like this and the FED balance sheet will be $1 trillion more than last year at this time. Currently now at $980 billion with this past week adding $20 billion.
Breakdown From Year Ago
Of US treasuries, the Fed added (and holds) precisely $0 in short-term bills.
Of US Treasuries, the Fed added 16 Billion in Inflation Indexed notes
Obviously inflation is not a concern to the Fed. Bank profits are.
The Fed is pumping money into the economy at at rate of $85 billion a month. Banks cannot use the money and are not lending it. The money piles up as excess reserves and the Fed (taxpayers) pays interest on excess reserves.
Nonetheless, the Fed has a clever idea! It proposes a new tool to pay banks even more interest on money banks don't lend and cannot use (as an alternative to shrinking money supply).
With little fanfare or analysis by mainstream media as to what is really happening,Bloomberg reports Fed Gets Bigger in Markets as QE Prompts New Tools.
The Federal Reserve is getting more involved in debt markets as it tries to compensate for the impact of its almost $4 trillion balance sheet on short-term interest rates.
Policy makers are testing a new tool intended to improve their control of near-term borrowing costs. The facility would allow banks, broker-dealers, money-market funds and some government-sponsored enterprises to lend the Fed unlimited amounts of cash overnight at a fixed rate in exchange for borrowing Treasuries in so-called reverse repo transactions.
The facility is the latest innovation from a central bank that has participated on an unprecedented scale in U.S. debt markets since the credit crisis began in 2007. It’s designed to help policy makers -- buying $85 billion of bonds a month -- siphon off excess cash in the banking system when they begin to tighten policy. Three rounds of so-called quantitative easing have enlarged the Fed’s balance sheet to almost $3.8 trillion.
The new tool -- called the fixed-rate, full-allotment overnight reverse repo facility -- also is aimed at helping Fed officials address distortions in the market caused by their securities purchases.
“It will serve to put whatever floor they want under rates,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “You’re providing pretty broad-based access to Fed balances as an investment option.”
While the Fed gained the ability in 2008 to pay interest on cash it holds in the form of excess bank reserves, that tool has limited effect in anchoring borrowing costs because only banks could park their funds at the central bank, Crandall said. By now offering to pay a fixed rate to a wider range of counterparties for their cash overnight, policy makers should be able to improve their control of near-term rates, he said.
“By offering a new, essentially risk-free investment, one would expect that anyone with access to such a facility would generally be unwilling to lend instead to someone else” at a lower rate, New York Fed President William C. Dudley said in a speech in New York Sept. 23.
Where Does It End?
From the Bloomberg article, one person sees things correctly. ...
With “the amount of bonds that have been piling up on the Fed’s System Open Market Account” there “has been a collateral shortage,” said Jim Bianco, president of Bianco Research LLC in Chicago. “What worries me about the Fed is that in reacting to the fact that their actions have created an unintended consequence in a free market, instead of saying ‘Oh, maybe we ought to re-think these actions,’ their answer is ‘No, we’ll go manipulate that problem now.’ Where does this end?”
Mike "Mish" Shedlock
Read more at http://globaleconomicanalysis.blogspot.com/2013/10/new-tools-more-pure-bank-profit.html#Up6c6j3apsJxWRWB.99
Welcome to stocks in the news where the headline meets the trendline.
Stock Number One: Micron Technology, Inc. (SYMBOL: MU)
And the headline says 5 Rocket Stocks Worth Buying This Week—Street.com
Increasing analyst sentiment is the reason for this stock's presence on our Rocket Stocks list,” writes the Street.com.”2013 has been a blockbuster year for Micron Technology (MU); shares of the flash memory maker have rocketed more than 161% since the calendar flipped over to January this year. And the big industry tailwinds pushing at Micron's back aren't showing any signs of slowing down right now.”
Analysts have revised the next quarter earnings outlook up from $.24 90 days ago to $.42 as a consensus estimate currently. That’s a pretty big move.
There’ve been 11 revisions upward for the quarter in 15 revisions upward for next quarter, with analysts doubling 2014 estimates.
The company trades about 14 times this year’s earnings in about seven times next years earnings.
That’s pretty significant. The company is recently coming off of 52-week high. You can use this pullback as an entry point
Our Ransom Notes Trendline says: Buy Micron Tech
Stock number two: Fauquier Bankshares Inc (SYMBOL: FBSS)
And the headline says: Local banks still hold about half of county market share – Fauquier Now.
“Despite the changes that corporate consolidation and technology have wrought, local financial institutions continue to hold almost half of the Fauquier County banking market,” reports Fauquier Now. “Three banks headquartered in Fauquier and Middleburg had 47.9 percent of the $1.34-billion market, according to the Federal Deposit Insurance Corp.’s annual summary, released last week.”
Fauquier trades about one times it’s book value, enjoys a dividend yield of 3.6% with quarterly revenue growth of 37%
I love community banks. This company is hitting a new highs not seen for some time.
Now let me tell you why one can ‘t buy this company.
It’s thinly traded.
A big day recently has been 15,000 shares. Its average trading volume is 2,600 shares.
Once you get in a stock like this, you have to be able to get out.
Our Ransom Note Trendline says: Avoid Fauquier Bankshares
Stock Number Three: SOHU (SYMBOL: SOHU)
And the headline says: Sohu, Changyou plunge on quarter– OptionsMonster
“The Beijing-based web portal reported an unexpected third-quarter loss of $65 million, citing higher costs and a special dividend,” reported OptionsMonster earlier today. “Even worse was disappointing numbers from Sohu's online-game subsidiary Changyou.com, which missed earnings expectations. SOHU is down more than 9 percent to $74, while CYOU plunging about 16 percent to $30 in the pre-market.”
What the price-earnings ratios give, the price-earnings ratios can take away.
The company’s currently trading around 29 times earnings, the stock price is up about 115% over the last year on fast growth.
But not quite fast enough, it would seem.
Our Ransom Note Trendline says: Sell Sohu
The Obama administration is taking things to a dangerous level. Liberal and progressive friends, this is something to be concerned about. I know you want to like this president but he is waging a war on journalists, trying to chill reporting. The White House is actively trying to intimidate anyone who dares shed a less than positive light on the Administration.
DON’T FORGET, WHETHER YOU ARE WORRIED ABOUT OUT OF CONTROL SPECIAL INTERESTS OR OUT OF CONTROL GOVERNMENT, THE TWO ENTWINED BEASTS OF CRONY CAPITALISM, WE NEED THE PRESS TO TELL THE PEOPLE THE TRUTH ABOUT WHAT IS HAPPENING.
And while they are going after reporters who tell the truth Obama’s White House is actively recruiting reporters into the fold.
It’s time to ask if this White House is out of control. But it’s not enough if the conservatives and the libertarians say it. The liberals, the people who fought the FBI and persecution in the 60s and 70s, need to say it too. History will reflect kindly on the liberals who stood up for what is right.